Kapazitätsverlust durch zu hohe Schadenrückstellungen

Definition

Under APRA’s prescribed method, the Minimum Capital Requirement (MCR) includes an insurance risk capital charge calculated by applying specified percentages to the value of insurance liabilities by class of business.[2][3] When loss reserves are established at the conservative end of a wide, manually determined range, insurance liabilities and corresponding capital charges increase, directly reducing the headroom between eligible capital and MCR. For a carrier targeting, for example, a 1.6x multiple of MCR as its internal capital ratio, any unnecessary uplift in technical provisions reduces the capacity to write additional business at target risk levels. For an insurer with AUD 1 billion of net insurance liabilities, a 3% excessive reserve level (above what would still meet the 75% probability threshold) adds AUD 30 million of liabilities. If we assume an insurance risk capital factor around 20–25% on these long‑tail liabilities, MCR rises by roughly AUD 6–7.5 million. To preserve its internal capital multiple, the insurer must either inject capital of similar magnitude or accept lower premium volumes. Using a conservative premium‑to‑capital leverage of 2.5–3x, that AUD 6–7.5 million capital effect equates to forgone gross written premium capacity of about AUD 15–22.5 million per year. For higher leverage ratios (3.5–4x) typical of short‑tail portfolios, the capacity loss can reach AUD 30–40 million of annual premium on the same balance sheet.

Why This Matters

The Pitch: Australian general insurers with AUD 1 billion of technical provisions routinely forgo AUD 20–40 million of additional annual premium capacity because conservatively set loss reserves inflate capital charges. Analytics‑driven reserve optimisation can unlock 3–5% extra underwriting capacity without breaching APRA capital ratios.

Affected Stakeholders

Head of Underwriting, Chief Actuary, CFO, Head of Capital Management, CEO

Related Business Risks